PM Daily Market Commentary - 9/10/2014

By davefairtex on Wed, Sep 10, 2014 - 10:35pm

Gold closed down -6.70 to 1249.90 on moderately heavy volume, while silver was off -0.11 to 18.98 on moderate volume.  Both gold and silver failed to confirm their doji prints from yesterday, and gold made a new low, invalidating any rebound signal.  Intraday, gold hit a low of 1244 today; it looks like a test of 1240 is inevitable.

The dollar moved higher today, up +0.13 to close at 84.23.  The biggest currency loser today was the Yen, down -0.59% vs the dollar.  The USD's move higher definitely caused PM trouble; traders seem unwilling to load up on COMEX futures while the dollar remains in an uptrend.  But gold was not singled out for abuse - the entire commodity complex dropped again today also.

GDX dropped -1.87% on moderate volume; GDXJ was off more, down -2.21% on heavy volume.   However GDX made new lows, while GDXJ did not - implying the junior miners are actually doing better overall relatively speaking.  The volume pattern supports this, with GDXJ up-day volume starting to exceed the down-day volume.

SPX was up +7 to 1995.69; it dropped as low as 1983 in the early part of the session, but rallied for most of the rest of the day, closing at the high for the day.  VIX dropped back down to 12.88.

Long term treasuries (TLT) continued falling, down -0.63%; TLT is now right on its 50 MA, and is down 4% from its highs of two weeks ago.  Whatever force was propelling traders into the long bond looks to be weakening.

Commodities were down yet again, off -0.55%.  Brent dropped -1.12 to 98.04, WTIC was off -1.04 to 91.71, both oil contracts making new lows once again.  Other than the one-day rally on September 1, oil has had a steady waterfall move lower.  This picture just encourages the PM shorts, and discourages anyone looking to get long.

I believe the past three months move in Brent may be an example of the market providing some information in advance to those open to receive it.  Remember back when ISIS looked to be seizing all of Iraq, and we all wondered why Brent sold off, to the contrary of everything we expected it to do?  My guess: it was just advance warning of the deleveraging/deflation event we are in the middle of right now.  And if we'd sold silver at the point Brent started "acting funny" we'd have sidestepped the entire move south in PM.

If we imagine everything is about manipulation, we might miss signals like this because we will be so wrapped up in righteous fury at government intervention that we will dismiss any other possible interpretations.  Just a thought.

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TexasCanuck's picture
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Joined: Jun 27 2013
Posts: 10
oil and gold

Every one in Texas is talking about the shale miracle. If we are not in a shale bubble I dont know what a bubble is. If oil price goes down it becomes uneconomic to drill for shale-- listen to chris's crash course. Shale only makes sense if oil prices go up. 

Art Berman and Andrew Hall are respected oil ananlysts who have placed large bets on prices rising in 4 to 5 years. Based on failure of shale to deliver. If oil goes up we will have inflation. Inflation brings rising gold.

Perhaps Yellen has succeded in printing more oil??

Falling gold is making me vomit.


Norman May


JAG's picture
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Joined: Oct 26 2008
Posts: 2492
Great Work

Great work Dave. I read your posts several times a week and I really appreciate your unique perspective.

Thanks for all you do.


davefairtex's picture
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Joined: Sep 3 2008
Posts: 5740
falling gold & falling oil

Commodity prices rise and fall on a more short term assessment of situations than we typically look at here.  If the typical PP participant is looking 5-20 years out, the commodity market tends to focus on the next six month timeframe.

If you are a trader, and you see China slowing down, reducing its real estate construction, US oil production on a straight line up, and on top of that you see Europe going into deflation (fewer loans, no growth, etc), what is your reflex?  Buy iron ore or sell?  Buy copper, or sell?  Buy oil, or sell?  Answer is simple:  sell, sell, AND SELL!  And PM tends to follow commodities, like it or not.

The turn down in shale production is theoretical at this point.  The charts I see show shale production continuing to head straight up.   Don't get me wrong, I think shale is most likely a property bubble which happens to have oil attached to it and it will end badly at some point, but the charts I watch are the same ones the traders watch, and for them, indicators are "all systems go" for the ongoing shale miracle.

So when the next six months looks rosy, and that doesn't agree with our 5-20 year projection, we just have to shrug and bide our time.  Watch for the turn but in the meantime, try to keep that "zen" attitude.  After all, you gotta live life, right?  No point in being upset all the time.

FWIW I agree with the bets placed by those oil traders.  I just don't know what the timeframe will be.

KugsCheese's picture
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1469
A Compressed Progressive Spring

will pop with great force the more it is compressed.  This FED and other central banks are increasing force on the spring...

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